A Trump presidency could mean anything but “business as usual’ for Canada’s chemistry industry

January 19, 2017

Since the stunning results of the U.S. election, I’ve been asked a number of times: “What affect do you think the Trump presidency will have on Canada’s chemistry industry and the broader Canadian economy?”

The easy answer, of course is that its too early to tell. And yet, the one thing we can say with some certainty is that the “business as usual” we are accustomed to, is unlikely to prevail.
Trump’s ‘no apologies’, ‘America first’ approach that has been the hall mark of his campaign and transition has raised expectations that the tepid economic growth over much of the past decade may give way to a renewed and more robust expansion in manufacturing sectors.

What does this mean for Canada’s chemistry industry? The business of chemistry continues to expand faster than broad-based GDP. And, with more than 60 per cent of Canada’s chemistry exports shipping to the U.S., there is good reason for us to expect a more bullish outlook in the months and years to come
But, there are also some potentially significant risks.

The first major area of concern is market access. Not only U.S. access to Canadian chemistry products, but also to primary, intermediate and finished goods produced in Canada. Canadian manufacturers purchase more than half of all chemicals produced in the country: from the auto sector, to the textile and forest products industries; to the energy sector, which is not only a significant consumer of our products, but also a important feedstock source. The domino effect from any disruption that impedes Canadian manufactured products and energy resources from reaching American markets is a threat to the well being of our industry. Whether its through renegotiation of trade agreements, tariffs, or an aggressive ‘Buy America’ strategy.

The second major risk would be adjustments to American taxation and regulatory regimes – changes that could put the U.S. even further ahead of Canada as a more attractive destination for investment. Changes in these areas could weaken or eliminate the one key advantage Canada has had for many years: competitive corporate tax rates (before US exemptions and adjustments) that are currently well below those of U.S. or other OECD jurisdictions.

The third risk is self-imposed in nature. With the exception of corporate tax rates, Canada’s competitiveness has been allowed to deteriorate as governments — at all levels and affiliations — have introduced a flurry of new regulatory activity that has imposed additional costs on business. At the same time, governments and society have been prone to near paralysis in decision making on major policies and projects. If this trend continues while the U.S. heads in the opposite direction, the impacts will be keenly felt.

If Canadian governments are unwilling to meet the competition head on and take measures to improve the investment climate, the downside risks of a Trump Presidency will far outweigh the upside opportunities for Canada’s chemistry sector.

Canadians and their governments have proven to be pragmatic and capable of course change in the past. With the New Year upon us, here’s hoping we remain capable of doing so in 2017.